Continental Plans to Issue New Bond to Cut Interest Costs

By Angela Maier -
Jul 8, 2013

Continental AG (CON) plans to raise at
least 500 million euros ($642 million) with a new bond issue to
help finance the early redemption of higher interest debt.

The debt will have a maturity of five years, the Hanover,
Germany-based manufacturer said today in a statement. Volume and
conditions of the issue will be determined in the “next few
days,” the company said.

With the new bond, “we will be able to reduce our interest
costs significantly and further improve the debt maturity
profile at the same time,” Chief Financial Officer Wolfgang Schaefer said in the statement.

The German manufacturer has largely avoided the downturn in
the European auto market by expanding in China and the U.S. and
focusing on in-demand components such as safety sensors and
fuel-injection technology. Continental forecasts sales to rise
about 5 percent this year to more than 34 billion euros while
predicting operating profit margins of at least 10 percent.

Continental said today it will buy back 1 billion euros of
securities paying a coupon of 7.5 percent. The bond will be
repaid on Sept. 16, four years ahead of its maturity date, the
company said.

The move comes a week after Continental said it will redeem
750 million euros of 8.5 percent notes due 2015 starting on July
15. The bond redemptions are part a broader effort by the
company to improve its financial profile, including refinancing
a 4.5 billion-euro loan in January.